Classical Growth Theory

  

Categories: Financial Theory, Econ

The idea that capitalism will bite itself in the ass because endless growth is not possible with limited resources and an increasing population.

Classical growth theorists believe that jumps in real GDP per person would make people feel more financially secure, and that therefore they’d do things like...have more babies. (The reverse is pretty much happening right now with millennials; no money for kids or a mortgage if you’ve got a mountain of student loan debt on your back.) When all those babies grow up, there’d be more workers and a similar amount of wealth to spread around, so each of them would get less than their parents, and probably make different decisions than their parents did, like, uh...having fewer babies.

You might be thinking, “are you talking about boomers and millennials?” It’s more complicated than that, but yup, pretty much. Next time you see a headline about how millennials are killing x or y industry, just think about Classical Growth theory: millennials just don’t have the money to toss at those industries that their parents did. Because their parents all had too many babies at the same time, but don’t want to admit it.

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